Buy or Lease a Truck for Logistics Business?
The decision to buy or lease a truck for a logistics business depends on various factors, including financial situation, long-term goals, and operational needs. Leasing a truck can help businesses stay up-to-date with technology, improve utilization, and minimize maintenance costs. Buying a truck provides long-term benefits such as positive equity, tax advantages, and complete control over maintenance and repair.
Fleet management software can be a useful tool for analyzing different scenarios and comparing the costs of leasing and buying.
Ultimately, the decision should be based on the specific needs and circumstances of the business.
Does your business predominantly depend on trucks? If this is the case, a very common question that might pop up in your head is “should I lease or buy a truck?”. Well, the answer changes from business to business and there’s not always a simple or straightforward solution. Looking at some of the short and long-term benefits and the main differences between the two options can help you make that choice. So today we will help you to discover the best fit option.
In this article, we will look into different aspects in the business world and unwrap the hidden pros and cons of both leasing as well as buying a truck.
Staying Up-to-date with Technology
Every now and then truck manufacturers in cooperating new technology to improve the performance of their trucks. New technology can help with advanced emission systems, improve fuel management and so on. As business owners, you wish only for the best in the market. Imagine being stuck with your old fleet when others are well equipped with the latest, this is a highly undesirable situation. The concept of leasing trucks comes to your rescue here. In the long-term, leasing new trucks can help you save money. It can also help you retain drivers, who prefer, like many of us, to drive new models.
Having ownership over trucks can be helpful when they are fully functional i.e when they follow a busy route. On the other hand, when the truck isn’t very busy i.e they are seasonal, you should think about leasing the truck. By doing so you can avoid the idling of the truck when it’s not on roads. If your business requires both fully functional trucks all around the year and few seasonal trucks then you should consider leasing a small part of your fleet and owning the rest. Many fleets today have a combination of owned, leased and rental trucks
Minimizing Maintenance Cost
Keeping your trucks running efficiently is critical for the success of your business. To achieve that, you need good mechanics, investment in parts, real estate to store those parts and a place to repair and maintain your trucks. One sensible option is to pay-as-you-go. You can do this by hiring a third-party to maintain the trucks i.e. leasing the trucks. Instead of being proactive with maintenance scheduling, many fleet managers wait until they absolutely have no other way but to seek help, which sometimes costs more than if they had fixed the problem earlier.
More than just avoiding fleet maintenance and management responsibilities that come with owning the vehicle, leasing can also remove other time-consuming administrative burdens. Leasing is not just about less paperwork when compared to owning vehicles. Depending on the structure of your organization, it can also mean lower payroll costs too. Among the administrative services that can support your operation under a lease agreement and save time are the management of titles, registrations and property taxes.
Your Fleet: The Face of Your Company
In service industries, fleet vehicles are often the face of the company. They portray a company’s image to customers and to potential clients. If ownership means keeping vehicles longer, newer leased assets can showcase your success.
Newer and well-maintained vehicles send out a positive message to your employees. Being assigned latest model units with the newest safety, communications, navigation and other systems and technologies can help improve morale, productivity, efficiency and even attract and retain drivers. This will in turn increase the inflow of customers.
To lease or to buy is a decision every fleet manager may face and there is no right or wrong answer to this question. Ultimately, the decision depends on what is best for your company at any point in time, so it is very important to base your choice on current needs and weigh the pros and cons accordingly.
Fleet management software can help you consider all of the relevant factors. It’s a very useful tool for analyzing a variety of scenarios and generate reports that compare the costs of leasing and buying, and how service lifecycles impact your current fleet and the business it supports.
Trucks: Lease or Buying Decision Making
The decision to own or lease a fleet is a well-considered choice that should be made by a transport proprietor. The decision usually relies on the finances and requirements thereafter. But to achieve long-term profitability, an adequate plan is needed. Before jumping into the leasing vs buying choice, there are few variables to consider here. And with proper GPS fleet management in place along with your choices, makes your business run smoother.
- Cost: Assess the money you are currently spending on the fleet and estimate how much you are going to spend on the lease and purchase options in the future.
- Flexibility: flexibility is vital to save a lot of cash for tiny companies. Ask yourself if in the future you will also need the same amount and type of cars.
- Maintenance: fleet maintenance is vital and unavoidable in the transportation sector. Analyze if it will be cheaper to lease a car or buy one.
Although leasing and purchasing have their own benefits for distinct transportation companies, making well-informed choices is better to learn about them.
There are two primary kinds of fleet leasing:
- Open-ended Leading
- Close-ended Leasing
Open-ended Truck Leasing
Leasing the vehicle over a certain period of time and extending it if necessary. But the vehicle becomes yours to sell once the contract period has expired. If the vehicle is sold at a price greater than the estimated price, the leaser will give you a refund. However, the company proprietor will have to pay the leaser the difference if the cars are sold at a reduced price.
Close-ended Truck Leasing
In such a type, you can lease the vehicles for a certain amount of time and the fleet must be returned to the leaser once it has expired. This type of lease is also called ‘ walk-away lease ‘ because after the lease period is over, you don’t have anything to commit to.
A tailor-made solution for fleet management and leasing for a multitude of market segments. Our team will guarantee that your fleet goals are met, depending on your company demands.
Operational management ranges from fuel management and infringement management to car purchase and disposal as part of our entire lifetime service. The part of fleet management services, which allows you to concentrate on how to enhance the company instead of being bound up in the operational components of operating a fleet.
Benefits of Leasing the Trucks
Operates for Small Capitals
Monthly repayments for leasing a vehicle are lower than the price of purchasing one directly. This is a significant reason why small business owners are inclined to lease the vehicle with humble beginnings.
Fleet maintenance and fleet maintenance software is a reasonably costly yet vital component of your company. Usually, the leaser requires care of the maintenance if you lease the vehicles, but there is an advantage from a cost perspective. If the leaser has its own maintenance unit, the cost will be minimal, but if the maintenance is performed by another company, the cost will increase.
Goes off the balance sheet
Once the fleet is purchased with a significant capital expense, your debt-to-equity ratio takes on a hit. For lenders and investors, this will badly reflect on your business. For a period of time, leasing the vehicles balances this cost.
Brings flexibility to the fleet
Company demands alter from time to time and it’s nice to have flexibility in the fleet they own. Analyze seasonally, geographically and customer-wise trends to know what sort of vehicles are needed for your fleet and their amount, and for the overall fleet management itself.
Opens the Door for New Vehicles
No transportation company can continue to update its car to fresh designs. However, you can lease the recent models with extra characteristics, security upgrades, lower maintenance requirements, effective fleet management, and much more fuel economy.
Purchasing a New fleet
Buying a fleet may look like an enormous economic move if you’re new to the sector, and your capital may not synchronize with your purchasing plans. But vehicle ownership comes with its own set of benefits.
Ultimately, payments end: the best part of purchasing your fleet is that one day, too, payments end in installments. But if you want to offer an upfront payment, you can always switch to more advantageous alternatives for small business financing. The fleet will also be a way for your company to make a strong investment.
Comes without Restriction
You are not accountable to anyone from wear and tears to mileage. But remember that if you own the vehicles, maintenance will be charged under your company. Therefore, teach your drivers to take care of the vehicles and also develop a plan to distribute the job equally across all vehicles, making your fleet management a simpler one.
Tax Advantages Offered
Over time, the value of vehicles depreciates and this can effectively assist your company instead of losses. This depreciation can compensate for the offset profit, which will give you tax advantages. The leaser is responsible for leasing the depreciation advantage.
Provides Positive Equity
Your fleet contributes equity to your company, making it favorable equity over the years. Positive equity implies that the quantity your fleet costs to your vehicles is lower than their value, and you can reinvest that distinction back into your business, making the fleet management side of your business a smoother one.
It’s difficult enough to manage your fleet every day. Looking ahead to the future? It seems impossible to do that. But at VAMOSYS Fleet Management, that’s precisely how we do it. By mixing analytics with the industry knowledge of our account executives, we keep an eye on what’s going on and how to make the most of it. Managing a transportation company is a difficult job involving many hard choices and judgments calculated. One of them is to lease or purchase fleet vehicles. While the pros and cons of these two alternatives are described in detail, your choice should be what fits your company best.